Kathleen Received Land as a Gift from Her Grandfather

question 78

Multiple Choice

Kathleen received land as a gift from her grandfather.At the time of the gift,the land had a FMV of $105,000 and an adjusted basis of $85,000 to Kathleen's grandfather.The grandfather did not have any gift taxes due.One year later,Kathleen sold the land for $110,000.What was her gain or (loss) on this transaction?

• A)no gain or loss
• B)($5,000)
• C)$20,000
• D)$25,000

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Definitions:

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability that excludes interest and income tax expenses to show the business's core profitability.

DOL

Department of Labor, a U.S. government department responsible for occupational safety, wage standards, unemployment insurance benefits, re-employment services, and some economic statistics.

Financial Leverage

The use of debt to increase the potential return of an investment.

Operating Leverage

A measure of how sensitive a company's operating income is to changes in revenue, indicating the degree to which fixed costs affect profitability.